Amidst crisis with the White House, how will Israel respond to the American demands? According to a senior source in the government, "The price for the American insult will be a de-facto construction freeze across greater Jerusalem. There will be no other choice, due to the government's stupidity," the source told Ynet.

The Prime Minister's Office has yet to confirm the freeze – however some sources in the cabinet admit that the US is demanding the cancellation of a plan
to construct 1,600 new housing units in Ramat Shlomo, across the Green Line in Jerusalem.

In article titled 'Driving drunk in Jerusalem', Thomas L. Friedman says US vice president should have gotten right back on Air Force Two immediately after Jerusalem construction decision, leaving behind a note reading, 'You think you can embarrass your only true ally in the world with no consequences?'

So far, the Labor ministers were those mainly advocating concessions, but now other sources in the cabinet are drawing fierce criticism over the government's conduct, and estimate that there will be need for much compromise.

The necessary gestures will halt construction work in all settlements. Tenders that were in the works will be put on hold, even if those were part of previously approved projects. In addition, Prime Minister Benjamin Netanyahu will
have to extend building restrictions in settlement blocks once the cabinet decision expires in September.

Settlement blocks will also be frozen after September (Photo: AP)

Other than the construction issue, the United States is demanding Israeli gestures toward the Palestinians and Palestinian President Mahmoud Abbas,
so to persuade the latter into entering proximity talks – which were slated to begin once US Special Envoy George Mitchell arrives to the region on Tuesday.

Sources in the cabinet point to two possible gestures – Israel's
agreement to talk about core issues during the indirect talks and mitigations such as further devolutions on security matters, prisoner release, checkpoint removal and transit permits.

Won't make public announcement

Israel has yet to respond to US' demands, and a final decision will most likely be reached by Tuesday, before Mitchell's arrival. Sources claim the prime minister is more likely to favor such gestures over a de-facto construction freeze.

"Even the Americans know that Netanyahu does not have the ability to make a public announcement on a full construction freeze in Ramat Shlomo. We are willing to apologize – and have already done so – but the prime minister can't promise not to build in Jerusalem; it contradicts who he is and what he represents," said a cabinet source involved in the details.

According to the source, "such a thing won't pass in the Likud or in the coalition. It might break up the government. The Americans have taken this a step too far; they know that such a statement is like Netanyahu joining with the far left –with Meretz.

Yishai to take blame?

"Therefore, it is unlikely that he will make such a statement – however the tense reality will force him to quietly enforce the construction freeze. Furthermore, this freeze will include all construction in the West Bank today, and probably extend even after the September deadline set by the cabinet," the source added.

The prime minister is also awaiting the conclusions of the Directors committee he appointed, headed by the secretary-general of Netanyahu's office. Only a day after the committee was formed to "prevent the reoccurrence of such incidents and probe the chain of events" – it began collecting findings.

According to a senior cabinet source, responsibility will most likely be put on Interior Minister Eli Yishai, who despite being instructed not to embarrass the PM after the 900 housing unit fiasco
in Gilo last November – failed to inform the lower echelons.

Even if the Interior Minister was not personally involved in the bureaucratic decision, Yishai, who sees himself as the "defender of Jerusalem," did not prevent the embarrassment
during US Vice President Joe Biden's visit, as he should of.

Officials in the Interior Ministry were not instructed to avoid publicizing the approval of the construction plan. The ministry spokesman issued a statement on the technical procedure of the plan – which led Israel to one of its most severe crisis with the White House.